Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong group revenues up 13% and EBITDA nearly tripled to GBP71 million.
- Ocado Retail has resumed its position as the UK's fastest-growing grocer.
- Significant improvement in underlying cash flow, up GBP101 million in the first half.
- Successful deployment of Re:Imagined technologies and growing OIA pipeline.
- Liquidity remains strong with GBP747 million of cash and an undrawn revolving credit facility of GBP300 million.
Negative Points
- Ocado Group PLC (OCDDY, Financial) still operates at a loss, although the trend is improving.
- High reliance on future module rollouts and partner success for achieving cash flow positivity by 2026.
- Some CFCs are still in the early stages of utilization, leading to variable performance across sites.
- Challenges in achieving consistent profitability across all client sites.
- Ongoing need for significant capital expenditure, although reduced from previous guidance.
Q & A Highlights
Q: What is the delta in the improved cash flow guidance and better EBITDA in technology solutions?
A: The delta is in working capital. Ocado Retail is a growing business, and its working capital requirements are growing. That is the key difference.
Q: Can you provide more disclosure on the online sales of your clients and the profitability of current CFCs?
A: We appreciate the desire for more transparency, but our clients' numbers are theirs to disclose. As we get more sites live with more clients, we might be able to provide more aggregate data without revealing individual client details.
Q: Are there any delays in the Kroger CFCs scheduled for 2025 and 2026?
A: No more than previously discussed. We expect strong growth and demand for more modules in existing sites, and we are confident in the timeline for Phoenix and Charlotte in 2025.
Q: What gives you confidence in the visibility of module rollout up to FY26?
A: We have strong confidence based on the rollout of sites that we know are going live, plus incremental modules in existing sites. We can see the growth and demand for additional modules in the near term.
Q: How does your technology compare against peers like AutoStore in the non-grocery market?
A: Feedback has been positive, especially for larger projects. While we are not as competitive in smaller projects yet, we are working on lower-cost versions of our peripherals to improve competitiveness in that segment.
Q: Why have you left it so late to refinance the December 2025 bond?
A: We believe we have a strong equity story and that the markets are open to us. We are confident in executing the refinancing before the bonds go current.
Q: Are you considering asset-backed financing solutions for refinancing?
A: It is an option for historical sites, but it is more interesting for future sites with existing and potential new clients.
Q: What are the key issues the partnership success program is trying to solve to reach targeted economics?
A: The program focuses on improving range, media opportunities, supply chain efficiency, labor planning, and overall operational metrics. We are seeing positive results in various areas, including productivity and customer acquisition.
Q: How much of the improvement in technology profits is due to empty modules?
A: The Hatfield fees contribute about GBP33 million annually, with around GBP10 million in operating costs. Some elements of this are included in the profit improvement, but it is not a significant amount.
Q: Does your cash flow forecast for 2026 include a retail EBITDA contribution?
A: Yes, it includes a modest retail EBITDA contribution, but it is not a significant amount.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
